Friday, February 20, 2009

Where did all the jobs go?

"About 670,000 businesses shut down and 6.7 million jobs “evaporated” last year because of the economic downturn, Chen Quansheng, an adviser to the Chinese cabinet, said in a magazine published by The People’s Daily, the Communist Party’s mouthpiece." - NYTimes

6.7 million jobs. I would love to know the breakdown of the jobs by provinces. I suspect a big bulk would have come from Guangdong. Add the millions of graduates being released into the market and you get a very serious unemployment problem.

"Arthur Kroeber, the managing director of Dragonomics, an economic research consultancy in Beijing, said companies looking to lower costs would probably resort to cutting wages rather than jobs. His prediction is consistent with a government order mandating state-owned companies not to lay off workers, presumably to maintain social stability."

If they workers are getting less wages, how can China depend on domestic consumption to take over the pillar of the economy from exports? Since opening up, China had been the factory of the world, providing cheap manufacturing options to Japanese and western corporations. Their growth stemmed from the fact that these corporations will bring in technological know-hows, capital to build factories and provide employment for the people.

The truth is, how many people in China actually buy 40" Japanese LCD TVs? Not many. They study the technology and give you another brand of Chinese LCD TVs at a much lower price. And who are the people who buy these Chinese LCD TVs? The very people who work in those Japanese factories. So if those Japanese factories go bust, who's going to buy those Chinese LCD TVs? Definitely not me. I never trust those brands~ Will you? (Voting until 26th Feb 2009! -->)

Big name hotels like the Marriott and Sheraton sprout up all over the place because they see a market. A market for business travellers. With less foreign visitors arriving for work, occupany rates will go down, subsequently less chambermaids will be needed. In fact, many other industries will be domino-ed by the spiral effect of the economic downturn.

GDP = consumption + gross investment + government spending + (exports − imports)

My forecast for the Chinese market :
Consumption - DOWN
Gross investment - DOWN
Government spending - UP
Exports - DOWN
Imports - NO CHANGE

Government spending is the only way to pull up the economy and keep workers on the payroll. I suspect that there will be a bigger military, more railroads and more R&D work in China over the course of 2009. So even in this downturn there's still a market for gun makers, railroad builders and scientists/engineers. And then there are those who would never have gotten a promotion will get one(with no pay increase) as their overpaid expat bosses are sent back home.

There's a silver lining to everything, isn't there?

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